Sasol [SSL], China talk synthetic fuel
March 16, 2004
By Quentin Wray and Bloomberg
Johannesburg - Sasol, the world's largest producer of synthetic fuels from coal, was in talks with the Shenhua Group, China's largest coal mining company, about building a plant there, the company said yesterday.
Sasol's spokesperson Johann van Rheede confirmed that the two companies were "in exploratory talks" but these were still at a very early stage and feasibility studies had not even been done yet.
"In principle, we are very interested in the Chinese market," Van Rheede said, but added that the company was also talking to other coal rich but oil poor countries, such as India and Australia.
Wen Xinsheng, the deputy general manager with Beijing-based Shenhua's coal-to-oil unit, said Shenhua was interested in setting up a 30 billion yuan (R24.4 billion) plant with Sasol to convert coal to petrol and diesel. The first phase of the plant was projected to have a capacity of 3 million tons of motor fuel a year, Wen said.
Shenhua was also in discussions with other companies as possible partners, as it was concerned Sasol would ask for "too much of this project", Wen said.
China is the world's largest coal miner and consumer, and has encouraged experiments in turning it to oil in an effort to help reduce its reliance on imported fuel from the Middle East.
Technical problems had slowed the country's efforts, said Yang Zhishan, a coal analyst with China Southern Securities.
South Africa pioneered the commercial use of coal-to-liquid fuel technology during the apartheid era as the country needed greater fuel self-sufficiency.
"South Africa has been successful in making fuel from coal, but the technology is secret," Yang said.
"If Sasol agrees to cooperate with Shenhua, the South African company will want a large share in the venture."
Shenhua planned to increase the investment to 100 billion yuan by 2020, by which time the project would have annual capacity of 10 million tons of motor fuel, said Wen.
Shenhua would increase investment to 300 billion yuan thereafter, Wen said. He said no decision had been made on financing the project.
Wen said Shenhua aims to start construction of the project next year after negotiations with foreign partners end.
"Talks between the partners have brought a lot of uncertainties to the timing of the project," Wen said, but declined to specify the sticking points.
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